Weighted Alpha

DEFINITION of 'Weighted Alpha'

A weighted measure of how much a stock has risen or fallen over a certain period, usually a year. Generally, more emphasis is placed on recent activity by assigning higher weights to it than those assigned to earlier movements. This helps to give a return figure that has a greater focus on the most current period and is a more relevant measure for short-term analysis. This technique is popular with technical analysts.

BREAKING DOWN 'Weighted Alpha'

If the stock was up over the period, it will have a positively weighted alpha. An unchanged stock price has a small weighted alpha. A stock whose price has fallen over the period will have a negatively weighted alpha. Technical analysts use this measure to identify companies that have shown a strong trend over the past year and, more specifically, to focus their attention on companies whose momentum is building.

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RELATED FAQS
  1. What are the best technical indicators to complement Weighted Alpha?

    Find out how technical analysts and traders use a stock's weighted alpha to confirm momentum or select specific stocks to ... Read Answer >>
  2. What is the Weighted Alpha formula and how is it calculated?

    Find out how investors and analysts calculate the weighted alpha of a stock's price by emphasizing recent price movements ... Read Answer >>
  3. What is a common strategy traders implement when using the Weighted Alpha?

    Learn how traders and investors use weighted alpha to identify momentum of a stock's price and whether prices will move higher ... Read Answer >>
  4. Why is the Weighted Alpha important for traders and analysts?

    Learn about the weighted alpha indicator, and see how traders and analysts use it to spot securities with momentum is building ... Read Answer >>
  5. How do I use Weighted Alpha to create a forex trading strategy?

    Find out how the concept of weighted alpha can be applied to currency contracts in the foreign exchange market to spot potentially ... Read Answer >>
  6. Stocks with a positive alpha are considered to be underpriced ...

    The correct answer is a): The risk-adjusted return attempts to measure the risks taken to achieve a desired return. Alpha ... Read Answer >>
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